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Monitronics to acquire Security Networks

ENGLEWOOD, Colo.—Monitronics will have more than 600 dealers and 1 million accounts when it completes the $487 million acquisition, announced today, of super-regional security company Security Networks, the 14th largest residential alarm monitoring company in the United States.

The deal, which is expected to close Aug. 16, includes $487.5 million of cash, and 253,333 newly issued shares of Ascent Series A common stock with an agreed value of $20 million, according to the statement. The purchase price, which is subject to agreement at closing, is based upon Security Networks delivering RMR of $8.8 million. Security Networks had 2012 revenues of $78.5 million and adjusted EBITDA2 of $46.5 million

“We want to take the best of Security Networks and the best of Monitronics and put them together so we have the best dealer program in the country,” Monitronics CEO Mike Haislip told Security Systems News.

The combined entity, which will continue to be headquartered in Dallas, “will be a bigger, stronger company that is able to support our dealers and be an even better opportunity for new dealers who want to join the program,” he added.

Security Networks, which is based West Palm Beach, Fla., has 225 dealers and 195,000 accounts. Rich Perry, CEO of Security Networks, will not join Monitronics, but the nearly 300 other Security Networks employees will stay with Monitronics.

Haislip said that all employees will stay through a transition period and he hopes that most will stay on long term.

Security Networks has a monitoring center in Kissimmee, Fla. and a customer care center in West Palm Beach, Fla. Haislip said that the two groups will work together in deciding how those facilities will be used in the future.

He said the company will realize operational synergies by combining the two companies. He said Security Networks was very well run by Perry and has “good people in place, the accounts look like our accounts, and we expect them to perform a lot like our accounts.”

Importantly, the business models of both companies is the substantially the same. “We understand their operation,” Haislip said. Integration of two companies “is never easy, but this will not be as difficult as some companies.”

The deal will be financed primarily by new debt at the Ascent level and Monitronics level and cash from Ascent's balance sheet, according to a company statement.

Ascent’s CEO William Fitzgerald said in a prepared statement that the combined companies will “provide enhanced borrowing capacity that will allow us to substantially fund the acquisition with incremental debt, delivering attractive value for our shareholders over time.”

Asked his opinion of the deal, Henry Edmonds, president of The Edmonds Group, (which was not involved in the deal) said that Security Networks “has been a great investment for Oak Hill,” [which explains why] the group is exiting on the early side. In addition, market conditions for a sale are favorable and Security Networks is a “very good fit for Monitronics.”

He said “Security Networks has been a strong competitor for Monitronics” and this deal allow Monitronics to expand their dealer network and eliminates some competition.”